Friday, 7 November 2008

Retail investors in buy mode as FIIs exit

Non-institutional investors, better known as individual or retail investors, bought stocks worth over Rs 4,000 crore over 45 days between Sep
tember 1 and October 23, at a time when foreign portfolio investors were net sellers in the market.

According to an internal analysis carried out by the market regulator SEBI, while net sales registered by foreign portfolio investors or FIIs were Rs 18,800 crore during this period, individual investors ramped up their purchase of shares.

This category of investors bought stocks worth Rs 4,100 crore, which fund managers reckon is a considerable amount especially when domestic mutual funds were net buyers — which is excess of purchase of stocks over sales — to the tune of just Rs 1,300 crore.

India’s insurance firms lent support during this period with net purchases of Rs 14,000 crore since many of them consider the steep fall in stock prices as a good opportunity to top up their investments in well-performing companies. But what has come as a surprise is the amount of buying by individual investors.

“There are many investors who are putting part of their money into stocks of good companies with a longer horizon and seem to be convinced that this is an opportune time to invest,” said an official in the securities market.

A good part of the buying may well have been accounted for by promoters of companies, who would have acquired shares from the secondary market in their individual capacity. Besides, senior management personnel of many corporates also seem to have been active in mopping up shares from the market, given the low valuations.

Over the past month or two, senior management personnel in firms such as L&T, Dabur and Glenmark Pharma have bought shares in their firms, according to the data provided by the exchanges. A senior executive of a bank which has interests in asset management and also the securities business said the purchase by non-institutional investors was quite large considering that it has come at a turbulent phase in the stock markets.

In his reckoning, high net worth investors or HNIs have not been very active this time around. For, local mutual funds, the going has been tough as corporate investors pulled out money from Fixed Maturity Plans due to concerns related to the quality of the investment portfolio of these plans and also owing to the squeeze on liquidity in the inter-bank market.

During the month of October, their assets under management dropped by 18% to Rs 4,31,901.42 crore, their biggest such fall. For foreign portfolio investors, it has been a double whammy. The steep slide in stock prices over the past couple of months, coupled with the weakening of the rupee against the USD, has hit them hard.

Source: EconomicTimes

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